MUMBAI: The Reserve Bank of India's talk of differentiated licensing for banks on the lines of the US and Singapore has raised hopes of many aspirants such as India Infoline and Muthoot who believe when it becomes a reality they could escape some tough regulations applied on full-scale banks.

"If differentiated licence is issued, banks which are not engaged in basic lending activity will not be obliged to meet these priority sector obligations," said Naresh Makhijani partner KPMG.

The central bank on August 27 has suggested that after years of single-track approach to bank licensing, it could consider different types of licenses, but did not elaborate. If this approach comes into force some of the rules such as mandatory holding of 23% of deposits in government bonds, and four percent of the deposits with the central bank may be waived.

"We would like to do niche lending," said Nirmal Jain chairman India Infoline which is among the 26 aspirants for a banking license. "We have applied for a banking licence, but as policy moves we would find our niche with our presence in over 2,000 branches across India."

For some of them are already in lending business through their non-banking finance companies such as Shriram Transport which lends for truck purchases, and Srei for building roads and utilities.

"It would be nice if we can continue with present NBFC business without converting them through differentiated banking license," said K P Padmakumar executive director Muthoot Finance. "As per the present norms, we will have to wind down some of our branches."

The idea comes from Singapore which has five different kinds of licenses, and Hong Kong a three tier structure. Indonesia recently moved to based on the "capital condition" of banks, and only those institutions with hearty capital reserves will be eligible for the multiple licenses permitting multiple activities.

``With the broadening and deepening of financial sector, some banks may choose to operate in niche areas,'' said RBI's paper. "This has certain obvious advantages in terms of managing business and risk management. Some countries have a differentiated bank licensing regime where differentiated licenses are issued specifically outlining the activities that the licensed entity can undertake.''

But not all are excited given the lack of clarity yet on the differentiation that the central bank could make.

Some believe that it may be just a few such as investment banking, or retail banking and may not include ones such as gold or truck lending.

"While RBI has talked about differential banking licence they have only suggested wholesale, retail and infrastructure," said GS Sundararajan, group director, Shriram Capital. "A lot depends on how the guidelines shape up.''